A cartoon on signing a personal loan.

What Can You Use A Personal Loan For?

A personal loan is a very versatile form of financing. With a personal loan, a lender is loaning you money with no guidance as to how to use it. This means that you can use the money as you see fit and that allows these loans to be able to solve a lot of financial situations. Let’s learn more.

What Is A Personal Loan?

First, let’s look at just what a personal loan is.

A personal loan in an unsecured loan made by a lender. Because it is unsecured, you do not have to put any collateral down on the loan.

When a lender issues you a personal loan, it will come with set terms. Your lender should spell out all of the terms for you when making you a loan offer. Before committing, you should know the length of the loan, the fees and/or interest and the amount of individual payments. Most personal loans will come with monthly payments, but yours could come with bi-weekly payments , weekly payments, etc.

Personal loans are very versatile, because a lender is simply giving you cash money. That means that you can use the loan for anything that you like. It is yours to do with as you wish.

Uses For A Personal Loan

People use personal loans for a number of different uses. Here are the most common.

Debt Consolidation

If you have a lot of credit card debt, you might consider a personal loan to consolidate this debt. This has a number of advantages.

First, it should save you money. If you qualify for a personal loan with an interest rate below what you are paying on your credit cards, it will save you money each month on interest. If your personal loan interest rate is not less than your average credit card interest, it is probably not worth accepting.

The second benefit of dent consolidation is that it makes your credit card payments easier to handle. Instead of having to pay multiple payments each month, you can make one simple payment. It can make paying your monthly bills much easier.

Medical Bills

Another common use of a personal loan is to pay for medical bills. They can help pay for past bills, but are particularly useful for paying for future procedures where pre-payment is required.

If you have past medical bills, a personal loan may or may not be a good idea. Many medical providers may be willing to accept payments for your bill and these payments may come without the interest and/or fees associated with a loan.

When paying medical bills, it may also be beneficial to try to negotiate the debt down. If you are paying them off with a personal loan, the provider may be willing to accept less money. Providers often give discounts for those not paying with insurance and they may rather accept a lesser amount instead of paying to send the bill through to collections.

Home Repairs

There are some repairs that just can not wait. If you need something serious like a new HVAC system, foundation repair or something similar, a personal loan can handle this type of problem. Most people don’t have thousands of dollars laying around.

Before proceeding with a personal loan, you should check with your service provider. Many offer special financing programs and if you qualify, you could end up with a lower interest loan. With good enough credit, you may even qualify for zero percent financing.


Ideally, you will only have one wedding in your life. That is unfortunately not always the case, but if you are one of the lucky ones, shouldn’t that wedding be special.

Unfortunately, weddings are expensive often costing tens of thousands of dollars. This is where the personal loan comes in. Pay for that wedding all at once and then pay it out over time. Personal loans are a great option for weddings when saving in advance is not a practical option.


In general, it is probably not a good idea to pay for a vacation with a loan. Financially speaking, it would be best to save for your vacation and plan one that is well within your means.

That being said, sometimes a special vacation is called for and a personal loan can help with that. Things like 20 year anniversaries or even honeymoons should be special and saving for these things in advance may not be easy or practical.

Misc Expenses

As you can see, a personal loan can be used for just about anything that the borrower wants to buy. They generally come with no strings attached.

One should use caution when taking out a loan to make sure that they have not explored other options. Loans are costly and if you can find a way to get what you need without one, you should probably do so.

Getting Approved For A Personal Loan

Okay, now that we have some uses for a personal loan, let’s look at how to get approved for one. Even if you already have good credit, there are things that you can do to get better loan terms. If you have bad credit, you may need to do some work just to get approved.

Here are some things that you should do.

Pull Your Credit

First, you need to pull your credit, because you really never know just what is going to be on there. You might think that all is good but you could have an error. Perhaps one of your creditors is reporting your information wrong or, even worse, you could have someone else’s information on your report.

Luckily, you are entitled to a free report every year from each bureau. Make sure that you pull one from all of them, Trans Union, Equifax and Experian. Do not think that they will all be the same.

If you find any errors on your report, you can dispute them. Just write a letter to the bureau identifying the mistake. They then have 30 days to investigate. Any information that is inaccurate and can not be proven must then be removed.

As you can see, this can take a bit of time, so act well in advance of applying for a personal loan.

Pay Down Balances

If you are seeking a personal loan, chances are good that you do not have money to pay down credit card balances, but it is something to look at.

Even paying down those balances a few hundred dollars can have a big impact on your score because it could change your credit utilization ratio.

Here is how it works. If you have 1000 dollars in credit and have used 500 dollars of it, your credit utilization is 50 percent. Lenders like to see ratios below 30 percent. If you took 200 dollars and paid down that debt, your utilization ratio would drop to 30 percent and your score would benefit.

Keep one thing in mind though. Just like with reporting errors it takes time for changes to reflect on your report. If you plan to use this strategy, put it into effect at least 2 months before applying for credit.

Long Term Improvements

If you are looking for a loan in the next few months, the above steps are about it. Everything else that you can do to improve your credit will take at least 6 months to show an improvement. That being said, it still is worthwhile to look at the future.

The biggest thing that you can do for the future is to pay your bills on time. This alone represents 33 percent of your credit score, so it is a big thing. A single 30 day late pay can drag your score down into the gutter.

Take advantage of every tool at your disposal to get those bills paid in a timely fashion Use automatic payments when possible and otherwise take advantage of bill reminders. Then, set aside one or two specific days a month to pay bills such as the first and the fifteenth.

Outside of payment history, the other long term improvements that can be made are credit diversity and credit age.

Lenders like to see a variety of credit being used and handled properly, not just revolving credit. Mixing in some installment loans, such as an auto or personal loan, can help.

Age just means that you have a longer credit history. You just have to wait this out and do not close old credit accounts when possible.

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James Car is a finance, loan and budget expert based in the United States. After attending Brookhaven college, he went on to become a successful entrepreneur. He now enjoys writing articles that help people save and make the most of their money.